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31 July 2012



EITI IN INDONESIA: A MULTI-STAKEHOLDER ADVOCACY This writing aims to serve as a ‘living document’ describing Indonesian’s ongoing EITI (Extractive Industries Transparency Initiatives) advocacy. This writing analyzes key elements in the advocacy and how multiple stakeholders inside and outside the country attempt to bring a halt to the ‘paradox of plenty.’ It is produced collaboratively through focus group discussions and interviews with EITI actors throughout May 2012. Even though this writing is produced with the support of RWI-USAID IKAT US Project, the views expressed in this publication are those of the contributors.

INDONESIA, EXTRACTIVE INDUSTRIES AND EITI Ranks among the world’s largest producers of extractives and the only country in the world both oil and gas-rich and minerals-rich, Indonesia is the most populous extractives-rich nation endowed with some of the largest copper, coal, nickel and tin reserves (Brown & Kirana, 2009). Therefore, it is essential for Indonesia to avoid falling into the ‘paradox of plenty’ or ‘resource curse’ and one way to do so is through the implementation of EITI. In countries participating in the EITI, companies are required to publish what they pay to the governments, and the governments to publish what they receive from companies. The EITI criteria require all stakeholders - represented in a multistakeholder group (MSG) of government, industry and civil society - to oversee the EITI process in each country. This MSG, according to Truex & Søreide (2010), is used best as a mean of promoting dialog and building consensus. Here, all stakeholders must be represented and able to operate free of ‘undue influence or coercion’ (Revenue Watch, 2012a). Therefore, it is essential for EITI advocacy to garner supports from government, industry and civil society. One among the evident features of the EITI process in Indonesia is that it is essentially multi-stakeholder in nature, as it is a result of the conjunction of efforts from different actors. This writing does not attempt to establish that multi-stakeholder approach works without any hindrance. The long laundry list of challenges, such as imbalances of power and capacity across stakeholders and problems in reaching consensus on key decisions, as listed by Truex & Søreide (2010), are also evident in EITI advocacy in Indonesia. Yet it suffices to say that throughout the years of EITI advocacy, the multi-stakeholder nature remains as one of the most noticeable and prominent features in the Indonesian experience. This writing attempts to delve into the following phases of EITI advocacy: 1) “understanding EITI”, 2) “promoting EITI”, 3) “institutionalizing EITI” and after Indonesia is named as an EITI candidate country in 2010, the current ongoing phase is 4) “implementing EITI”. This writing aims to describe these phases, and also capture how stakeholders from the government, extractive companies and civil society organizations as well as international agencies working in Indonesia view EITI. It argues that engagement that is taking place amongst those actors put EITI as their common, or at least compromise, agenda.



I. UNDERSTANDING EITI (2001-2003) One way to view EITI is from the formulation of Extractive Industries Review (EIR) in 2001 as its embryonic stage (on EIR, see Annex). When the World Bank initiated the development of EIR report, the person appointed in 2001 to head this team was former Minister of Environment for Indonesia Emil Salim. EIR Final Report, issued in December 2003, was produced through multi-stakeholder approach. It recommended that the World Bank Group (WBG) should abstain from financing extractive industries sector unless it ensured that their operations lead to poverty alleviation. Emil Salim, considered as a key figure to the overall landscape of EITI advocacy in the country, continued to carry forward his in-depth understanding on the importance of extractive industries revenue transparency in his service in various influential positions, including in his current post as a Member of the Advisory Council to the Indonesian President. Meanwhile EIR team members continued to promote EITI in their capacities as either civil society activists or government officials.

I.1. GOVERNMENT The phase of understanding EITI can also be seen from the attendance of government officials in the first EITI conference. In June 2003, the first EITI conference was organized in London - attended by 140 delegates representing 70 governments, companies, industry groups, international organizations, investors and civil society activists (on EITI see Annex). This included representatives from the Government of Indonesia as one of the world’s resource-rich countries. In this event, Des Alwi, then First Secretary of Environment, London Embassy, and Masnellyati Hilman, then Deputy Minister for Technical Infrastructure Development for Environmental Management attended the event. In this occasion, as representative of the Government of Indonesia, Masnellyati Hilman delivered a statement that Indonesian would do its utmost to implement the EITI according to Indonesian laws and regulations (IESR, 2012a). In the next couple of months, in December 2003, when EIR report was issued and triggered controversy due to its critical tone, Minister of Finance Boediono in his position as one of WBG governors, released a statement from the Government of Indonesia to support the implementation of EIR recommendations. It is evident that during this first phase of understanding EITI, the Government is on the frontline of grasping EITI ideas and showing their commitment to the principles. It can be argued that the seeds for EITI essentials have been planted through the process of producing EIR report involving a number of high-ranked government officials.

I.2. CIVIL SOCIETY After Soeharto’s New Order dictatorship was toppled down in 1998, the reform era opened doors for freedom of expression and assembly, allowing civil society organizations to push for anti corruption, good governance and transparency. Throughout 2001-2003, Indonesian civil society organizations had been pushing for transparency - including freedom of information initiatives pushed by a coalition of 40 civil society organizations that put together a draft law and proposed it to the National Parliament in February 2001 (Laksmini, 2003). While some scholars have argued that coalition building is a strategy long known to civil society in Indonesia since 1970s, civil society network increased significantly after the reform era with marked rise of density – or how everyone is connected to



everyone else (Nugroho & Tampubolon, 2008). This is also evident in the phase of understanding EITI. Since 2002, through its linkage with Transparency International (TI), Indonesian-based Transparency International Indonesia (TII) had been involved in Publish What You Pay (PWYP) coalition and became the entry point to further dissemination EITI to civil society organizations in the country (on PWYP, see Annex). In June 2003, TII was one of the attendees of the first EITI global conference in London.

I.3. COMPANIES EITI conference in London in 2003 was also attended by company representatives, such as Newmont, Rio Tinto, TotalFinaElf, BP, Chevron Texaco, Conoco Philips, ExxonMobil, etc. (DFID, 2004). Companies attended in this conference also operated in Indonesia. It is argued that internal communication and coordination within these extractive companies might as well brought EITI idea into the radar of the companies.

I.4. INTERNATIONAL ACTORS Besides WBG initiatives through the production of EIR in 2001, another event in June 2002 brought global attention to the establishment of Publish What You Pay (PWYP) campaign (on PWYP, see Annex). PWYP called for natural resource companies to disclose their payment to governments for every country of operation - including Indonesia.

LESSONS LEARNED EXTRACTED FROM THE 1st PHASE In this first phase, the Government is in the frontline of getting to know EITI initiatives due to the involvement of high-ranked, key officials in global initiatives to push for revenue transparency. Commitment for transparency from the top level then carries conversations of EITI in the bureaucracy of both the government as well as extractive companies. It should be highlighted that civil society organizations has also been pushing for transparency and good governance through joining forces with international network.

II. PROMOTING EITI (2003-2007) EITI conference launched in London in June 2003 has brought together Indonesia’s government and civil society into the same platform for transparency. In 2004, President Susilo Bambang Yudhoyono assumed office on 20 October with anticorruption, transparency, good governance as his key agendas. This is considered as the moment when EITI advocacy enters the second phase of campaign.

II.1. GOVERNMENT Conversations regarding the EITI continued to take place in the midst of wider fiscal reform efforts in Indonesia. In 2006, the International Monetary Fund (IMF) Report on the Observance of Standards and Codes (ROSC) for Indonesia praised the Indonesia for its national reforms to improve transparency, yet highlighted the lack of transparency in extractive industries’ revenues and referred to EITI as an option for reform (Brown & Kirana, 2009). Mid 2007, it is reported that Minister of Finance Sri Mulyani supported transparency initiatives in the extractive industries sector and this year also, in various meetings, Minister of Energy and Mineral Resources Purnomo Yusgiantoro also expressed his favourable inclination towards the EITI (Brown & Kirana, 2009).



II.2. CIVIL SOCIETY Civil society in Indonesia continued to push for transparency and good governance, particularly by taking the roles of government watchdogs. In 2005, TII produced ‘Extractive Industry Economy Transparency in Indonesia’ report – exposing corruption loopholes in the extractive industry revenue stream. This phase also witnessed the move made by Indonesian civil society to connect with the global network for similar cause. In 2006, TII and ICW attended the 3rd EITI international conference and became part of PYWP (IESR, 2012a). To civil society organizations in Indonesia, especially those advocating for transparency and good governance, EITI provided platform to advocate transparency from the revenue side. This framework has complemented their core concerns on expenditure transparency. To promote EITI, TII also hosted discussion rounds with civil society organizations to understand this global standard better. In October 2007, Peter Eigen – a seasoned World Bank personnel experienced in Africa and Latin America, founder of TI, and EITI Chair since 2006 - visited Indonesia. The purpose of his visit was to conduct a series of meeting with Indonesian authorities, national Members of Parliaments (MPs) and executives of state-owned oil company Pertamina and attending TI Annual Meeting earlier (Extractive Industries Transparency Initiative, 2007). In his meeting with President Susilo Bambang Yudhoyono, Peter Eigen encouraged the EITI implementation as an instrument against corruption. The President insisted that his administration intended to be a bulwark against the country’s legacy of corruption. It can be argued that during the phase of promoting EITI, civil society organizations in Indonesia intensified their links with international community in promoting transparency. Meanwhile, as Indonesian government, especially the newly elected regime, was displaying its commitment toward openness, civil society organizations beyond Indonesia’s national boundaries also took the wide-opened opportunity to amplify the message of transparency to the top level of the government.

II.3. COMPANIES According to Revenue Watch (2012a), companies operating in Indonesia started to be the focus of discontent that grows from the perceived unfair revenue sharing agreements; environmental and social costs to local communities; corruption and the presumption that military aid, especially from the U.S. is closely tied to the protection of extractive operations in remote regions. The Supreme Audit Agency (BPK) has uncovered potential violations in the calculations of profit sharing and the debiting of cost recovery claims proposed by Production Sharing Contract contractors. The resulting loss to Indonesia could reach US $3.53 billion or around Rp23 trillion. This figure was reported by the BPK after it examined financial reports for early 2004 and 2005 from five contractor companies: PT Chevron Pacific Indonesia, PT Conoco Philips Grissik, PetroChina International Jabung Ltd., PT Medco E&P Rimau and BOB Upstream Pertamina-PT Bumi Siak Pusako. The BPK encouraged the government to issue clear, detailed and firm regulations regarding cost recovery. It can be argued that this marked the recognition on the importance of revenue transparency to maximize its benefit to the general public. As the media publicized the revenue loss, companies were put under the lime light for its lack of transparency.



II.4. INTERNATIONAL ACTORS In 2004, WBG established the Multi Donor Trust Fund for EITI (MDTF-EITI). MDTFEITI served to mobilize technical assistance and financial support to EITIimplementing countries and global knowledge activities on EITI (on MDTF, see Annex). Through the MDTF, the World Bank Group supported the EITI by administering the funds to provide technical and financial assistance to countries implementing or considering implementing the EITI. The support included making EITI advisers and consultants available to governments to assist them in implementation; sharing international best practices; and providing grants to governments to help support EITI implementation (Extractive Industries Transparency International, 2012a).

LESSONS LEARNED EXTRACTED FROM THE 2nd PHASE The second phase shows as the call for transparency resonates from the top level of the government, the conversation of revenue transparency continues to be carried out by both the government and civil society. While the civil society plays the role of government watchdog, the government on the other hand also has to showcase its commitment to transparency. This phase also witnesses how civil society and the government of Indonesia endorse the message for transparency in the same forum. In this phase, the private sector is put under scrutiny for alleged corruption and the voice for revenue transparency continues to gain leverage for both civil society and the government and supported by international actors.

III. INSTITUTIONALIZING EITI (2007-2010) Since 2007, there are attempts to put EITI in formal, legal binding regulations – marking the transition toward the third phase – institutionalizing EITI. This phase witnesses how civil society diversifies its roles vis-à-vis the government, as well as how the government changes its attitude toward civil society. This phase also showcases how open access to information reverberates from national to local levels and vice versa.

III.1. GOVERNMENT A presidential decree in support for EITI was first initiated by vice chairman of Corruption Eradication Commission Erry Riyana Hardjapamekas in 2007. This initiative received supports from Indonesian civil society, especially those advocating for anti corruption, transparency and good governance. In the process of formulating the decree, civil society took up consultative role vis-à-vis this agency. The draft formulation process was a multi-stakeholder attempt – pushed by various champions from government, civil society and international actors. In 2008, due to cabinet reshuffle, the position of Coordinating Minister of Economic Affairs was passed from Boediono to Sri Mulyani Indarwati who took up the role to continue endorsing EITI. It should be noted that prior to his leaving his post, Boediono issued Presidential Instruction no. 5 of 2008 on the focus of economic programs of 2008-2009, giving EITI a push to his successor. As a result, policy context in support to EITI was firmly established in the regulatory stage. On 4 March 2009, the Government of Indonesia announced its intention to work toward EITI compliance. An official Note of Understanding amongst Coordinating



Minister of Economic Affairs, Finance Minister and Minister for Energy and Mineral Resources marked this intention. This note set out an agreement to work together on the implementation of extractive industries revenue transparency – lead by Coordinating Minister for Economic Affairs (Extractive Industries Transparency Initiative, 2009). Following this step, Coordination Team for the Preparation of the Implementation of Extractive Industries Revenue Transparency was to be established. Representatives from the International EITI Secretariat and the World Bank-administered Multi Donor Trust Fund (MDTF) visited Jakarta in March to meet with Indonesian stakeholders to progress this initiative.

III.2. CIVIL SOCIETY In 2007, Revenue Watch Institute (RWI) in partnership with TII initiated a series of multi-stakeholder workshops in resource-rich districts – bringing together government officials in national and district levels and achieving two-fold purpose: mobilizing supports to transparency initiatives in the local levels and amplifying demands for these initiatives to the national government. In mid 2007, TII board members visited Minister of Finance Sri Mulyani to discuss the EITI. In the same year in October, the visit of Peter Eigen to endorse EITI also showed significant endorsement from civil society organizations. In 2007, the Government attempted to institutionalize EITI in the form of presidential decree. Civil society organizations played their roles here, as TII provided technical assistance and an academic paper supporting the drafted decree was produced by Center for Indonesian Law and Policy Studies (Pusat Studi Hukum dan Kebijakan/PSHK) and reviewed by PWYP Indonesia (EISR, 2012a). The end of 2007 marked a pivotal milestone on the civil society organization side. November 2007, 43 civil society organizations established PWYP Indonesia (on PWYP see Annex). These civil society organizations came from 7 resource-rich provinces all over the county and continued to advocate the EITI through engagement with local government who have informally professed support from the EITI and looking for ways to move forward. This coalition served as a strategic platform – as they comprised of a wide-ranged of civil society organizations with an array of core concerns and key expertises which complement each other. As a result, it created an inclusive platform for extractive industries stakeholders to establish civil society engagement. In this civil societydriven initiative, representatives from regional government from oil-rich Riau province also participated in this event (Brown & Kirana, 2009). This marked the convergence of civil society and the government in promoting the same interest for revenue transparency. In 2008, RWI collaborated with Indonesian Centre for Environmental Law (ICEL) on researching policies and practices of Environmental Financial Assurance (EFA) models on funds from the government or other third parties be used to finance mine closure and rehabilitations programs (Revenue Watch, 2012h). In this research, ICEL worked together with fellow Publish What You Pay Indonesia member - Pokja 30, a local civil society network operating in resource-rich East Kalimantan that suffered from environmental pollution and damage from un-reclaimed 18 coal and mining companies. This research enabled civil society organization and governments to weigh in on the formation of new EFA models.



In 2009, another Publish What You Pay Indonesia member, Indonesian Corruption Watch (ICW) collaborated with RWI and produced numerous, credible reports that have resulted in myriad institutional changes throughout the government (Revenue Watch, 2009). Among ICW's projects are: the compilation of an oil and gas and minerals and mining data base for both future analysis and public education; advocacy efforts through press outreach; meetings with Indonesia's Corruption Eradication Commission (KPK), the Financial Auditor’s Body (BPK) the parliament (DPR) and the DPD; interviews with extractive industry experts; and the uncovering of discrepancies in the state's cost recovery, reported revenue, royalties and subsidies from extractive activity. Part to their work identified discrepancies in government revenues, over-reported cost recovery, backlogs of unpaid coal royalties, and variance in policies for mineral royalties, the Supreme Audit Agency (BPK) has ordered a special audit of all oil and gas contracts, the Commission for the Eradication of Corruption (KPK) has created a special task force to monitor the production and sale of oil and gas, the parliament has created a special committee to monitor the oil and gas industry, and the government is attempting to renegotiate some of its contracts. It should be noted that after 7 years of advocacy by civil society coalition, Freedom of Information Act (known as Undang-Undang Keterbukaan Informasi Publik) was finally enacted in 2008 – allowing the public to access to public information, including revenue-related information. Open access of information helped reverberating the call for revenue transparency to the local levels. This could be seen in sub-national governments of Blora and Bojonegoro, two districts in East and Central Java provinces of Indonesia, home to an oil reserve Cepu Block. The Block’s contribution up to 20 percent of Indonesia’s oil production resulted in the view of the communities to see it as ‘a jackpot.’ From 2008-2010, RWI along with the Open Society Foundations Local Government and Public Service Reform Initiative (OSF-LGI) joined forces with Pattiro – also a Publish What You Pay Indonesia member - as a civil society organization to initiate capacity building for local government of both districts, through partnership with Institute for Discourse Research and Application (Lembaga Penelitian dan Aplikasi Wacana/LPAW) in Blora and Bojonegoro Institute (BI) in Bojonegoro (Revenue Watch, 2012b). The project was to help the local partners, government and other stakeholders understand the challenge of oil wealth and develop two important instruments to manage that wealth: a transparency mechanism (to address the issues of revenue transparency) and a midterm development plan (to address the issues of revenue management). In this period of time, LPAW launched the first attempt for civil society to use the FOI Act. Efforts to obtain information on a government-owned company garnered wide supports from both national and sub-national media attention and support. Now both districts are known as ‘world pioneers in implementing transparency for sustainable development at the local level’ (Prijosusilo, 2012). Blora and Bojonegoro have also been the sites for resource-rich district government officials to visit and exchange experience.

III. COMPANIES This phase witnessed how information requests, guaranteed under FOI Act, became the ammunition for civil society to demand transparency on the companies, as showcased in the sub-national civil society advocacy. Meanwhile, it should also be noted that EITI was a theme addressed in special luncheon talk in the 33rd Indonesian Petroleum Association Convention and Exhibition (Indonesian Petroleum Association, 2009). This talk on 5-7 May 2009 was attended by key companies



officials operating in Indonesia. This talk served as an entry point for strong assertion on EITI ideas by this business association to companies in Indonesia.

IV. INTERNATIONAL ACTORS In January 2007, DFID/World Bank focused on accelerating the process in Indonesia and appointed an EITI consultant to establish relationship with Indonesian civil society as well as engaged the government and companies. The drafting of a presidential decree for EITI initiated in 2007 was also supported with assistance from DFID/World Bank (EISR, 2012a). Since 2007, RWI also mobilized support to EITI advocacy national, regional as well as sub-national levels. It should also be noted that in 2008, ‘EITI Business Guide’ was published elaborating how companies could support the implementation of EITI (Extractive Industries Transparency Initiative in partnership with International Business Leaders Forum, 2008).

LESSONS LEARNED EXTRACTED FROM THE 3rd PHASE This third phase shows how interactions amongst the government, civil society, companies and international actors increase and intensify - in terms of frequency as well as level of engagement, made accessible and inclusive by current contexts and dynamics. Those who previously were on the polar oppositions are engaged in dialogues and forums to exchange their views, information and experiences. This phase also witnesses how civil society diversifies their roles according to their core concerns and key expertises and forms a coalition to strategically push for EITI. Meanwhile the government also mainstreams EITI through channels of bureaucracy in various layers and agencies and along the process, champions from various stakeholders emerge and join forces. This phase also exhibits how companies are catching up in the efforts to endorse EITI.

IV. IMPLEMENTING EITI (2010-NOW) This ongoing phase depicts the period undertaken by Indonesia as it is named as an EITI candidate country. This part describes the latest development from the ongoing EITI advocacy in Indonesia.

IV. 1. GOVERNMENT On 23 April 2010, the President of Indonesia signed Presidential Regulation no 26 of 2010 on Transparency of National and Local Extractive Industry Revenue into force. MSG (Multi Stakeholder Group) was set up according to this presidential regulation. On 14 June 2010, EITI Multi Stakeholder Group held its first meeting and approved a work plan. Representatives from civil society members and extractive company associations - including the Indonesian Coal Mining Association, Indonesian Mining Association, and Indonesian Petroleum Association - were also part of the MSG (The Jakarta Post, 2010). On 14 September 2010, after the enactment of this Presidential Regulation, the Government of Indonesia through Coordinating Minister of Economic Affairs Hatta Radjasa released a public announcement that Indonesia will implement EITI and requested formal admission for Indonesia into EITI Candidacy from the EITI Board (Inisiatif Transparansi Industri Ekstraktif, 2011a). On 21 October 2010, in the EITI Board meeting in Dar-es-Salam, Tanzania, Indonesia was named as a candidate country by the EITI, meaning that all state revenue generated by the extractive industries was open to public scrutiny. On 10



November 2010, as the Coordinating Minister for Economic Affairs appointed the full membership of the multi-stakeholder EITI Implementation Team. Throughout 2011, Indonesia began its process to set up a reporting template. This was marked with the dynamics amongst stakeholders due to differences of interests over details of this template. March 2011, a workshop on EITI template finally agreed on the scope of report, detailing companies to be involved in EITI process. On 24 August 2011, in an EITI Implementing Team meeting, attended by representatives from the government, corporation, civil society organization and EITI Secretariat from Oslo, a template used as the basis of EITI report was finally agreed (Inisiatif Transparansi Industri Ekstraktif, 2011b). In 2012, in accordance to the EITI Rules, the EITI Board agreed that Indonesia has until 18 October 2012 to complete an ‘EITI Validation’ - an independent assessment of compliance with the EITI’s requirements. Countries that meet these requirements are designated as EITI Compliant (Extractive Industries Transparency Initiatives, 2010). The transitional procedures agreed by EITI Board provided Indonesia with more time and now Indonesia must complete EITI Validation by 18 April 2013.

IV. 3. CIVIL SOCIETY In 2010-2011, Indonesian Parliamentary Centre (IPC) trained civil society representatives from 5 resource rich districts and Jakarta to provide technical assistance on revenue transparency to members of parliament (MPs). These trained activists later on provide direct technical assistance to sub-national MPs in 4 regions and to national MPs to play more active oversight roles and draft more effective governance (Revenue Watch, 2012c). It is expected that through this initiative, constructive dialog between civil society and the government in the local level could be established as both were on the same page on the issue of revenue transparency. At the end of the initiative, civil society organizations developed their action plans to engage with stakeholders – this catapulted civil society to exercise in this constructive mode of dialogue. In 2010, TII with RWI support, outreached to Indonesian media by setting up training for editors and journalists on EITI issues (Revenue Watch, 2012d). This initiative combined national and local journalists into the training sessions on the roles the media played in endorsing transparency in extractive industries sector, especially through the avenue of investigative journalism. Equipped with good knowledge on the inner workings of day-by-day journalism, this initiative engaged not only journalists but also editors to ensure that the issues were strongly grounded in the media personnel. Follow-up interactions with participating journalists showed how they became more sensitive and in tuned with revenue transparency issues. The year of 2011 was a golden moment for regional-level of EITI advocacy as Indonesia held the chairmanship of ASEAN and became the focus of attention of international communities. Formed in 1967, ASEAN is a geopolitical and economic organization of Southeast Asia countries aimed at accelerating economic growth, social progress and cultural developments. In terms of extractive industries, it is key to develop regional standards for industry process to avoid ‘race to the bottom’ amongst Southeast Asian countries. RWI with Institute for Essential Services Reform (IESR) develops an ASEAN Revenue Watch Transparency Index with a network of Southeast Asian civil society (Revenue Watch Institute, 2012e). In 2010, a civil society groups comprising of Cambodia (Cambodians for Resource Revenue Transparency/CRRT), Indonesia (PWYP Indonesia), the Philippines (Bantay Kita), Vietnam (PanNature and CODE)



and Timor Leste (Luta Hamutuk) formed a Working Group on ASEAN Extractive Industries Transparency and in 2011, Task Force for Extractive Industries and ASEAN was set up, comprising of a fluid coalition of a wide ranged of civil society groups under the Solidarity for Asian People’s Advocacy Working Group (SAPA WG) (EISR, 2012b). This has resulted in regional acknowledgement of EITI in ASEAN Ministerial Energy Meeting (AMEM) in September and ASEAN Ministerial Cooperation Action Plan (AMCAP) in December – both in 2011. Moreover, on 29 – 31 March 2012, the ASEAN Civil Society Conference also known as ASEAN People Forum (APF) was held in Phnom Penh, Cambodia and attended by civil society groups from Burma, Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam (including many PWYP members). Extractive industry transparency was high up on the agenda and the civil society called on ASEAN to “urgently establish a framework as a standard in managing natural resources in a transparent and accountable manner” (Publish What You Pay, 2012b).

IV. 3. COMPANIES Once EITI officially implemented in Indonesia since 2010 with the issuance of government regulation No. 25/2010 on transparency of revenues and local revenues derived from extractive industries; mining, oil and gas, minerals and coals companies were required to transparently disclose the amount of benefits received from exploration activities in Indonesia (Bisnis Indonesia, 2011). Multinational oil companies including British Petroleum, China National Oil Offshore Corporation (CNOOC), International Petroleum Exploration Corporation (INPEX), Petrochina, Total and others participated in the multi stakeholder process that generated the reporting template (Revenue Watch, 2012e). In May 2010, in the 34th Annual Convention of Indonesian Petroleum Association, Vice President Boediono made a statement that EITI was one of the seven priorities of the government’s energy plan (Extractive Industries Transparency Initiatives, 2012c). This had couched EITI in the private sectors and emphasized it as global standard for extractive industries revenue transparency. Companies are also started to take part in EITI-related trainings organized by civil society. On 8 November 2011, company representatives in Blora, as well as local government officials, local MPs and civil society representatives in the area took part in oil and gas revenue sharing. Blora is where Mobile Cepu Limited/MCL (subsidiary of Exxon Mobil) operates as a contractor as part of a Production Sharing Contract scheme. In 2012, according to PWYP Indonesia, 20 out of 71 mining companies and 39 out of 57 oil and gas companies agreed to divulge their production outputs and earnings to the initiative (Jakarta Globe, 19 April 2012).

V. 4. INTERNATIONAL ACTORS Revenue Watch (2012f) noted that in July 2010, Revenue Watch, working in collaboration with the Publish What You Pay-US coalition and other members of the transparency community, helped successfully advocate for a landmark provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires energy and mining companies to make public their payments to governments. Under the new law, all domestic and foreign companies registered with the U.S. Securities and Exchange Commission (SEC) must publicly report how much they pay governments for access to their oil, gas and minerals, beginning in FY2012. The U.S. bill helped to inspire a 2010 motion in the UK Parliament urging the government to require fuller disclosure of government payments, while proposals for country-by-



country reporting reforms have also been discussed at the EU level and are also currently undergoing consideration by the International Accounting Standard Board. In the recent 2011, a multilateral initiative called Open Government Partnership (OGP) was initiated on 20 September to secure commitments from governments to promote transparency, serving as a global stage to showcase transparency, including on extractive industries revenue (Revenue Watch, 2012g). Indonesia was one of the 8 founding governments of this global campaign. Another event of an international scale, the 18th International EITI Board Meeting, was hosted in Indonesia in October 2011 – marking the first meeting in Asia Pacific region in the history of the EITI Board (Extractive Industries Transparency Initiatives, 2012c). March 2012, RWI's Indonesian partners engage with partners in the wider region to further IKAT-U.S.'s three-pronged approach, engaging on the national, regional and sub-national levels – following RWI sub-national project, Bantay Kita will develop a sub-national transparency model project, in the Philippines with support from Pattiro Institute; IPC will share Indonesian EITI experiences with counterparts in Cambodia, Malaysia, the Philippines and Vietnam; and IESR will continue to lead regional advocacy for better governance at the ASEAN level (Revenue Watch, 2012h).

LESSONS LEARNED EXTRACTED FROM THE 4th PHASE After Indonesia is named an EITI Candidate country, the focus inside the country shifted on the completion of templates made by stakeholders. Through its diverse roles, civil society continues to engage with the government as well as the company and collaborate with international actors to push for the completion of this template. Opportunities arise to collaborate with regional partners in Southeast Asian region to push for EITI advocacy inside and outside Indonesia. This brings EITI advocacy in the country to the next level, requiring more rigorous attempts from all stakeholders in joining forces for revenue transparency.



EITI MILESTONES Below are milestones of EITI in Indonesia (Extractive Industries Transparency Initiatives, 2012c) YEAR 2007

MONTH November December







May July September October November


January – July March July July August

October November 2012


ACTIVITIES The Publish What You Pay Coalition Indonesia a coalition of 43 NGO’s from seven resource rich provinces calls on the Indonesian Government to implement EITI. The Indonesian Corruption Eradication Committee (KPK) drafts an EITI Presidential Regulation and reviews it with the Ministry of Energy and Mineral Resources and the Ministry of Finance. Coordination Minister for Economic Affairs Sri Mulyani Indrawati sends an official letter to the EITI Secretariat indicating that Indonesia intends to become an EITI candidate country and work towards achieving EITI compliance. Coordinating Minister for Economic Affairs, Minister of Finance and Minister of Energy and Mineral Resources sign a Note of Understanding to prepare for implementation of extractive industry revenue transparency in Indonesia, based on the criteria and implementation indicators of the EITI. President Susilo Bambang Yudhoyono signs and enacts Presidential Decree 26/2010, which formally confirms Indonesia’s commitment to transparency and the EITI, and creates a Steering Team and an Implementation Team to oversee the process. th Vice President Boediono makes a statement to the 34 Annual Convention of the Indonesian Petroleum Association that EITI is one of the seven priorities of the government’s energy plan. EITI Implementing Team held its fist meeting and in that meeting agreed a time- and cost-specific work plan, which remains in force. Coordinating Minister for Economic Affairs Hatta Rajasa makes a formal commitment to work with Civil Society and Industry in the EITI process, and requests Indonesia’s entrance into the EITI as a candidate country. In Dar-es-Salam Tanzania, the EITI Board accepted Indonesia as an EITI candidate country joining a community of 35 other candidate and compliant countries. The government appoints a multi-stakeholder Formation Team (an interim secretariat) empowered to set up a Permanent Secretariat, designate its members, define its budget and work plan, propose which companies and government entities will report in the first round of EITI, what revenues will be reported on, and transparently select a reconciler to compare these two sets of reports, prior to publication. The scope of EITI Indonesia reporting was negotiated and agreed. Decisions were reached on which firms will report, which government entities will report, what revenue streams will be reported on, and over what period of time At the Paris Global EITI Conference, Indonesia is elected to one of only two slots on the EITI Board to represent more than 30 candidate countries. A USD 1.05 million grant from EITI MDTF was signed into force by the Country Director of World Bank and the Minister of Finance of the Republic of Indonesia. The Oslo Secretariat extends Indonesia’s validation deadline from two years from the date of assuming candidacy, to two-and-half years. EITI Indonesia must undergo external validation by April 2013. Implementation Team decides that revenues paid to the government by 57 oil and gas operators and their partners, and 6 copper and/or gold, 7 tin, 3 nickel, 2 bauxite and 54 coal production units, will be published in the first EITI report. These are believed to represent the most materially significant oil, gas and mining firms in Indonesia. Indonesia hosts the 18th International EITI Board meeting. This marks the first meeting in the Asia Pacific region in the history of the EITI Board. EITI reporting templates were sent out to reporting companies and government entities, and have since started to come back in The EITI Indonesia Secretariat was established.



EXTRACTING INDONESIAN EXPERIENCE This section elaborates key themes and topics identified from the abovementioned experience of Indonesia advocating EITI in the recent years.

1. EITI as Leverage While the government as well as the companies view EITI as a showcase for its commitment to the global agenda for transparency and good governance, for civil society organizations in Indonesia, especially those advocating for transparency and good governance, EITI provides a platform to advocate transparency from the revenue side. This framework has complemented their core concerns on expenditure transparency. As transparency, good governance and anti-corruption civil society movement in Indonesia concentrated in expenditure issues, EITI is viewed as an opportunity as it gave them leverage to start roaming into realms of revenue - once seen only as ‘the dark side of the moon.’ In other words, EITI serves the interests of Indonesia’s extractive industries stakeholders – the government, the companies as well as civil society. Civil society organizations and government officials are involved in the same forums – showcasing their endorsement for transparency and exchanging information and experiences as dialogue partners. While remaining critical on government performance, civil society maintains their engagements as well as mobilization of supports and technical assistance through promotion and dissemination of EITI.

2. EITI as a Multi-Layered Multi Stakeholder Advocacy The Indonesian experience emphasizes that EITI advocacy requires stakeholders inside and outside the country to work together. It is because EITI advocacy requires consistent pressures from various points so this idea would lead to the building critical mass that pushes for the tipping point. Indonesia witnesses how coalitions of civil society organizations in the national level mushroom and promote various issues and advocacy works through the rhizomatic processes of multiple entry and exit points -- by spreading toward available political spaces, by complementing each others’ works as well as amplifying each other’ messages. So, while some organizations focuses on delivering EITI training to journalists, others provides capacity building for members of the parliament; while some work in the sub-national level, others amplify EITI in global stage; while some focuses on managing a coalition, others mobilize technical assistance to the government. Also, EITI is campaigned to heads of districts from the sub-national level to ministers in ASEAN level – through multi-layered engagement, in the forms of technical assistance, capacity building, resource mobilization and so forth. This generates rapid flows of experience, information and evidences to various policy and decision makers working in different levels. EITI advocacy in Indonesia shows that exchange of information on the importance of revenue transparency happened not only vertically from sub-national to regional and vice versa, but horizontally as well – as evident from exchange of information amongst a number of resource-rich districts. EITI is then linked and framed to various relevant contexts such as access to public information, good governance, anti corruption, transparency and so on – that are highly relevant to core concerns and key expertises of each organizations. Such contextualization has framed EITI not as an ‘outside intervention’ mobilized by the Western world or donor agencies. It is



because EITI endorsements and demands for resource transparency were voiced from the local level as well. The use of multi stakeholder approach to ensure pressure points of EITI advocacy is maintained consistently however require continuous coordination and communication with all parties involved to ensure that EITI is mainstreamed into dominant discourses. This also needs thorough understanding and sensitivity on how decisions and policies are made and agreed amongst the different layers and actors within the government and company, otherwise this will accumulate into stonewalling, resistance and even rebuttal.

3. The Role of Champions in EITI Advocacy In Indonesia as well as any other part of the world, multi stakeholder approach varies in terms of effectiveness and sustainability. In the case of advocating EITI in Indonesia, it is evident that coalition is seen as one of the strategies to create leverage in policy advocacy, including EITI. Throughout Indonesia’s multi-layered, multi-stakeholder EITI advocacy, information comes from various directions. Access opened by donor agency representatives was used effectively by civil society representatives to engage with key government officials, resulting in rapid, multiple exchange of information amongst stakeholders, which in the past were distant and even in polar opposites. This provides favourable situation for the emergence of champions who join forces in pushing for revenue transparency. Champions serve as bridges to connect different interests and as powerful catalyst to accelerate the process. In the case of Indonesia, these champions push the EITI agenda forward and facilitate coordination among institutions responsible for technical details of EITI such as contracts. In the case of Indonesia, champions include government high-ranked officials pulling strings in the policy making leading to the adoption of EITI, yet it should not be forgotten that these officials are closely linked with civil society who continuously feed in their perspectives into the process. On champions, please refer to IESR’s The Synergy for the Future: The Role of Indonesian Civil Society Organizations on the Indonesian Extractive Industry Transparency Initiative (IESR, 2012a).

4. The Growing Importance for EITI Knowledge Management Indonesian experience has resulted in a number of champions from various stakeholders and the wealth of knowledge and experience should be well managed. Solid knowledge management on EITI experience in Indonesia is key in the facilitation of exchange of experience, information sharing, extraction of common threads as well as lessons learned through out the process of advocacy. Better knowledge management in the future would ensure continual support, wider engagement with larger audience and more meaningful participation for carry forward EITI advocacy. Besides contributing to the strengthening of collaboration throughout EITI actors, good knowledge management also widens up the partnership to be more inclusive. From a strategic point of view, while admitting that EITI advocacy in Indonesia is accelerated by a number of champions who go the extra mile, overreliance to these figures should be avoided – and one sustainable way to do so is to ensure that knowledge accumulated throughout the process is accessible to those who share the same concerns. By doing so, pressure points of EITI advocacy is maintained effectively in a consistent manner and mainstreamed efficiently into the political and social discourses.



ANNEX Extractive Industries and the ‘Paradox of Plenty’ Extractive industries are, undisputedly, key forces in today’s global economy. Yet two third of the world’s poorest people live in countries rich in natural resources – a phenomenon known as the ‘paradox of plenty’ or ‘resource curse.’ These resources can generate substantial revenues to reduce poverty and foster economic growth with effective, responsible governance. Revenue transparency is an essential part of this equation because it facilitates oversight - which deters corruption and helps reduce citizens’ mistrust of government management of resource wealth. Most importantly, transparency guarantees that public resources benefit the entire country and not just a select few. Disclosing information about the money governments receive from exploiting oil, gas and minerals is the first step toward guaranteeing that these resources benefit the public.

Global Campaign for Revenue Transparency The journey for global advocacy for revenue transparency was long and winding. In January 1999, Human Right Watch (HRW) published rampant human right violations in Nigeria fueled by multinational companies in a report titled ‘The Price of Oil’ (Human Right Watch, 1999). Another grim look is also portrayed in ‘A Crude Awakening’, a exposé issued by Global Witness (GW) in December 1999 on the apparent complicity of the oil and banking industries in the plundering of state assets during Angola’s years of civil war. It became clear that the refusal of oil companies to release financial information have aided and abetted the mismanagement and embezzlement of oil revenues and concluded to a public call to ‘publish what you pay’ (Publish What You Pay, 2012). In June 2002, Global Witness, CAFOD, Open Society Institute, Oxfam GB, Save the Children UK and Transparency International UK, along with Catholic Relief Services, Human Rights Watch, Partnership Africa Canada, Pax Christi Netherlands and Secours Catholique/CARITAS France and other civil society organizations launched a worldwide Publish What You Pay (PWYP) campaign (Publish What You Pay, 2012). PWYP called for natural resource companies to disclose their payment to governments for every country of operation. In Indonesia, 43 civil society organizations from 7 resource-rich Indonesian provinces came together in a national seminar in November 2007 and establish PWYP Indonesia (IESR, 2012a). Regional government from oil-rich Riau province also attended in the event – highlighting the multi-stakeholder nature of this initiative. This multi-stakeholder engagement continued to be endorsed through this coalition, for example government officials from resource-rich districts visited Bojonegoro and Blora to learn from their experience, Bojonegoro local parliament visited EITI Secretariat in Jakarta to consult the formulation of Transparency regulation. In 2009, PWYP Indonesia comprises 34 active members with corruption or transparency in their agenda (IESR, 2012a).

The World Bank and Extractive Industry Review In June 2000, World Bank Group (WBG) President James Wolfensohn responded to criticism from global civil society about WBG involvement in extractive industries with a promise to review WBG’s role in this sector (Extractive Industries Review, 2003). This led to the appointment of Emil Salim, a former Minister of Environment for Indonesia, as Eminent Person of the Extractive Industries Review (EIR) in July 2001. The question EIR aimed to address was: can extractive industries projects be



compatible with WBG’s goal of sustainable development and poverty reduction? (Extractive Industries Review, 2003). To search for the answer, in 2001-2003, the EIR team engaged in dialogues with multiple stakeholders: governments, civil society and indigenous peoples’ organizations, affected communities, labour unions, industries, academia, international organizations as well as WBG - done in a series of regional workshops in Brazil, Hungary, Mozambique, Indonesia and Morroco; 6 research projects, 4 project site visits, as well as informal consultations with stakeholders worldwide. EIR team launched its report December 2003 (Tebteba Foundation, 2005). EIR Final Report recommended that the WBG should abstain from financing the sector unless it adhered to a series of enabling conditions to ensure that its operations truly lead to poverty alleviation. It was clear that the EIR report triggered a controversy in international community. In September 2004, WBG release its WBG Management Responses in its response to EIR report confirming its supports to EITI by requiring revenue transparency as a condition for new investment in extractive industries (World Bank Group, 2004). In 2004, WBG established the Multi Donor Trust Fund for EITI (MDTF-EITI) to mobilize technical assistance and financial support to EITIimplementing countries and global knowledge activities on EITI (Independent Evaluation Group, 2011). As of November 2007, supporting countries that have contributed to the MDTF were Australia, Belgium, Canada, France, Germany, the Netherlands, Norway, Spain as well as United Kingdom as the founding contributor (World Bank, 2008).

Extractive Industries Transparency Initiative (EITI) In September 2002 in World Summit of Sustainable Development in Johannesburg, Extractive Industries Transparency Initiative (EITI) was launched. First initiated by civil society, EITI was then expanded by UK Prime Minister Tony Blair as an initiative to encourage oil and mining companies to publish what they paid and government to disclose what the received (Ross, 2008). EITI aimed to be a multi-stakeholder framework to encourage government, companies involved in extractive industries, international organizations, civil society organizations and others to work together voluntarily promoting transparency of payment and revenues from extractive industries (Independent Evaluation Group, 2011). In June 2003, the first EITI conference was hosted in London and attended by 140 delegates representing 70 governments, companies, industry groups, international organizations, investors and civil society. In implementing EITI, partners are expected to take specific action. First, the government must require extractive firms operating within their territory to “publish what they pay” authorities for the right to and explore and extract energy or minerals. Second, government institutions must record the revenues they receive and entrust an independent administrator to compare extractive sales and revenues. Then governments must create a multi-stakeholder group (MSG). The MSG is tasked to evaluate the information provided by business and government and review the independent evaluation. Finally, an outside organization checks and validates the report. Validation evaluates EITI implementation on consultation with stakeholders. In doing so, EITI is designed to create a feedback loop between the government and the governed, acting as a counterweight to corruption. EITI as a multi-sectoral partnership will only be successful where the partners perceive that compliance with the partnership outweighs the cost of non-compliance and it generate results that no public or private actor might achieve acting independently. EITI encourages firms to listen to and effectively respond to stakeholder concerns, builds civil society capacity



to work with policymakers, business leaders and opens up discussion spaces between government and the industries (Aaronson, 2011).

EITI Governance and Country Implementation The EITI’s governance structure, formally established in 2006, is as follow. The EITI Board is responsible for the overall development, strategic direction, outreach and advocacy of EITI, as well as the validation process of EITI implementing countries. The EITI Board reports to a bi-annual EITI Conference and is supported by an EITI Secretariat located in Oslo, Norway. The EITI Secretariat is responsible for country interactions specifically related to EITI validation. Regarding country implementation of EITI, there are 3 categories applied: 1) “applicant”, 2) candidate and 3) compliant countries. “Applicant” countries are those who are preparing themselves to become EITI candidates. To become an EITI Candidate, an implementing country must meet the 5 sign up requirements and once these have been met, EITI implementation involves a range of activities to strengthen resource revenue transparency. These activities are documented in country work plans. The development of a work plan – discussed with and agreed by stakeholders – is one of EITI’s 5 sign up requirements. To achieve Compliant status a country must complete an EITI Validation within 2 and a half years of becoming a Candidate Country (Extractive Industries Transparency Initiatives, 2012). Once a country is Compliant, the country must undergo Validation at least every 5 years, or upon the request from the EITI International Board. Validation is an essential element of the EITI as an international standard. It provides an independent assessment of countries implementing the EITI and what measures they should take to make better and faster progress. An independent validator carries out the assessment of whether all the requirements outlined in the EITI Rules have been met. The EITI Board, through the EITI Secretariat, oversees the Validation process. The EITI Board reviews all Validation Reports. If the Board considers that the country meets all of the EITI Requirements, the country will be designated as EITI Compliant. Where the validation report shows that a country has made progress but does not meet all the EITI Requirements, the country will remain a Candidate. Where Validation shows that no meaningful progress has been achieved, the Board may revoke the country’s candidate status.

Extractive Industries Landscape in Indonesia According to Revenue Watch (2012i), oil and gas revenues are collected by the national government, through the Ministry of Finance, the Ministry of Energy and Mineral Resources, the regulatory body BP Migas, and the national oil company Pertamina. After the collection, these funds are shared with producing regions. Thirty percent (30%) of gas revenues passing to the sub-national level: 12% to the producing district, 12% split between all other districts in the province, and 6% to the producing provincial government. 15% of oil revenues pass to the sub-national level: 6% to the producing district, 6% to all other districts in the producing province, and 3% to the producing province. Ministry of Energy and Mining collected mining royalties and Ministry of Finance collected taxes before 80% of those revenues are also distributed sub-nationally. While projections of revenues sharing disaggregated by province and district are available on the Ministry of Finance's website, the data is not available until after the budget cycle and does not necessarily correspond to actual revenue transfers. Indonesian law does currently not require contract transparency, although there is a growing demand from civil society. Contracts are, however, reviewed by Parliament. The related discontent focuses on the perceived unfair revenue sharing agreements; environmental and social costs to local



communities; corruption and the presumption that military aid, especially from the U.S. is closely tied to the protection of extractive operations in remote regions.

Indonesia’s EITI Implementation Team As detailed in IESR (2012a), Indonesia’s EITI Implementation team divided into Supervisory Team and Executive Team. Supervisory Team is led by the Coordinating Minister of Economics and comprised of: Ministers of the Energy and Mineral Resources, Finance, and Internal Affairs; The Head of the Development Finance Controller (BPKP); The Head of Executive Agency for Upstream Oil and Gas Activity (BPMIGAS); and as the representative of the civil society is Emil Salim. Executive Team is led by the Coordinating Deputy of Energy and Mineral and Forestry Resources from Coordinating Ministry of Economic Affairs, consist of: National Accounting Deputy, Development Finance Controller (BPKP); Directorate General of Budget, Department of Finance; Directorate General of Taxes, Department of Finance; Directorate General of Treasury, Department of Finance; Directorate General of Finance Reconciliation, Department of Finance; Directorate General of Oil and Gas, Department of Energy and Natural Resources; Directorate General of Mineral, Coal and Geothermal, Department of Energy and Natural Resources; Directorate General Public Administration and Regional Finance, Department of Internal Affairs; Financial Control Deputy of BPMIGAS; President Director of PT. Pertamina; 3 representatives from the Local Government Association of Producers of Mineral, Coal, Oil, and Gas (Asosiasi Pemerintahan Daerah Penghasil mineral, batubara, minyak bumi dan gas bumi); 3 representatives from association of companies working in the extraction of mineral, coal, oil and gas; and last not least, 3 representatives from Civil Society Organisations that is committed to work on revenue transparency on the extractive industries on local and national level (IESR, 2012a).



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ACKNOWLEDGEMENT As author of this collaboratively-produced writing, Gita Widya Laksmini Soerjoatmodjo (Indonesian Parliamentary Center) would like to thank resource persons and participants of focus group discussions on 14 May 2012 and 28 May 2012 and interviews on 24 May 2012 who contributed to the production of this writing, as well as regional partners who provided feedbacks in the 2nd IKAT US Partners Meeting in Jakarta on 8-9 June 2012 (in alphabetical order): Maryati Abdullah (Publish What You Pay - Indonesia), Ermy Ardhyanty (Pattiro Institute), Roslita Arsyad (Revenue Watch Institute-Asia Pacific), Mericio Akara (Luta Hamutuk Institute-Timor Leste), Ambarsari Dwi Cahyani (EITI Secretariate-Indonesia), Kharina Dhewayani (Institute for Essential Services ReformIndonesia), Morentalisa Hutapea (Institute for Essential Services Reform), Ananda Idris (EITI Indonesia Interim Head of Secretariat - Indonesia), Chandra Kirana (Reducing Emissions from Deforestation and Forest Degradation-Indonesia), Ridaya Laodengkowe (Publish What You Pay-Indonesia), Eugene T. Lee (Research for Social Advancement-Malaysia), Muammar M. (Pattiro Institute-Indonesia), Yesi Maryam (Institute for Essential Services Reform-Indonesia), Cielo Magno (Bantay Kita – the Philippines), Jose Melvin Lamaninao (Bantay Kita-the Philippines), Muhammad Rasyid Ridla (Pattiro Institute-Indonesia), Chitra Retna S (Revenue Watch Institute-Asia Pacific), Matthieu Salomon (Revenue Watch Institute-Asia Pacific), Sulastio (Indonesian Parliamentary Center-Indonesia), Chhay Sarath (Cambodia Resource Revenue Transparency-Cambodia), Marinke van Riet (Publish What You Pay International-UK), Diah Tantri (Revenue Watch Institute-Asia Pacific), Pham Quang Tu (Consultancy on Development-Vietnam), Fabby Tumiwa (Institute for Essential Services ReformIndonesia) and Nguyen Thi Hai Van (People and Nature Reconciliation-Vietnam).



20120731 eiti in indonesia a multi stakeholder advocacy usaid deliverable  


20120731 eiti in indonesia a multi stakeholder advocacy usaid deliverable